“Our precedent does not limit collateral 23 estoppel to patent claims that are identical. Rather, it is the identity of the issues that were litigated 24 that determines whether collateral estoppel should apply.”
How later courts described this case
- “Our precedent does not limit collateral 23 estoppel to patent claims that are identical. Rather, it is the identity of the issues that were litigated 24 that determines whether collateral estoppel should apply.”
- requiring that “the party against whom collateral estoppel 5 is asserted was a party or in privity with a party at the first proceeding”
Written by the judges who cited it.
The opinion
1
2
3 UNITED STATES DISTRICT COURT
4 NORTHERN DISTRICT OF CALIFORNIA
5 SAN JOSE DIVISION
6
7 FINJAN LLC, Case No. 17-cv-04467-BLF
8 Plaintiff,
ORDER GRANTING MOTION FOR
9 v. JUDGMENT OF INVALIDITY BASED
ON COLLATERAL ESTOPPEL
10 SONICWALL, INC.,
[Re: ECF 479]
11 Defendant.
12
13 Before the Court is the motion of Defendant SonicWall, Inc. (“SonicWall”) for a judgment
14 of invalidity of U.S. Patents 6,154,844 (the “’844 Patent”), 6,804,780 (the “ʼ780 Patent”), and
15 8,677,494 (the “’494 Patent”) based on collateral estoppel. Mot., ECF 479, Exh. A; see also Reply,
16 ECF 479, Exh. C. Plaintiff Finjan LLC (“Finjan”) opposes. Opp., ECF 479, Exh. B.
17 I. BACKGROUND
18 On August 4, 2017, Finjan filed suit against SonicWall for the infringement of ten patents.
19 Since then, the parties have engaged in extensive litigation, see Order on Motion for Summary
20 Judgment, ECF 381; Order on Motion to Strike, ECF 413; Order on Motions in Limine, ECF 470,
21 with trial set for early 2022, see ECF 463. On March 23, 2021, Judge Bencivengo issued a summary
22 judgment order invalidating the ’844 and ’780 Patents, along with U.S. Patents 8,079,086 (the “’086
23 Patent”), 9,189,621 (the “’621 Patent”), and 9,219,755 (the “’755 Patent”) (collectively, the
24 “Invalidated Patents”), as indefinite based on the term “Downloadable.” Finjan, Inc. v. ESET, LLC,
25 Case No. 3:17-cv-0183-CAB-BGS, ECF 869 (“ESET Order”) at 8.
26 The ESET Court based its decision on its construction of “Downloadable” as “a small
27 executable or interpretable application program which is downloaded from a source computer and
1 (“’520 Patent”) and 6,480,962 (“’962 Patent”) that the Invalidated Patents incorporate by reference.
2 ESET Order at 2-5. The court then considered “whether a skilled artisan in 1997 would have
3 understood with reasonable certainty based on the specification and prosecution history what the
4 inventor meant by a ‘small’ application program and therefore understood what comes within the
5 scope of the claims.” Id. at 6. The court answered this query in the negative, explaining that Finjan’s
6 proffered explanation—that “‘small’ depends not on size but on the function” and that a small
7 executable does not require installation—was without “support from the specification, the
8 prosecution history, or from any extrinsic sources in the relevant time period.” ESET Order at 7-8.
9 It concluded
10
Finjan never offered evidence of a reasonable range for the size of a
11 small executable or interpretable application program as understood
by a skilled artisan in 1997 based on examples provided in the patent
12 specification. Instead, Finjan elected at trial to offer a new
understanding without reference to the size of the application as the
13 objective boundary of a “small” application. Finjan’s new definition
is not supported by the specification or prosecution history. It may
14
be convenient to support Finjan’s infringement contentions against
15 ESET’s accused devices, but Finjan’s new explanation does provide
clear notice of what constitutes a “small executable or interpretable
16 application program.”
17
ESET Order at 8. The court denied Finjan’s motion for reconsideration on May 19, 2021. Finjan,
18
Inc. v. ESET, LLC, Case No. 3:17-cv-0183-CAB-BGS, ECF 874 (“Reconsideration Order”). The
19
court entered Judgment on the Invalidated Patents on May 20, 2021. Id., ECF 875.
20
SonicWall now “seeks judgment that the ’844 and ’780 Patents are invalid based on the
21
ESET Order and that the ’494 Patent is invalid based on the same “issue” resolved against Finjan in
22
the ESET Order.” Mot. at 1.
23
II. LEGAL STANDARD
24
The doctrine of collateral estoppel, also known as issue preclusion, conserves judicial
25
resources by precluding relitigation of issues that have already been decided in a prior proceeding.
26
See Allen v. McCurry, 449 U.S. 90, 94 (1980), Molinaro v. Fannon/Courier Corp., 745 F.2d 651
27
(Fed.Cir.1984), A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700 (Fed.Cir.1983). When applying
1 collateral estoppel law in a patent infringement case, the law of the circuit in which the district court
2 sits controls. Aspex Eyewear, Inc. v. Zenni Optical Inc., 713 F.3d 1377, 1380 (Fed. Cir. 2013).
3 “However, for any aspects that may have special or unique application to patent cases, Federal
4 Circuit precedent is applicable.” Id. (citations omitted). Defensive collateral estoppel, also known
5 as issue preclusion, prevents a party from relitigating an issue of claim construction where: “(1) the
6 issue necessarily decided at the previous proceeding is identical to the one which is sought to be
7 relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party
8 against whom collateral estoppel is asserted was a party or in privity with a party at the first
9 proceeding.” Hydranautics v. FilmTec Corp., 204 F.3d 880, 885 (9th Cir. 2000).1
10 III. DISCUSSION
11 A. The ‘844 and ’780 Patents
12 SonicWall’s argument is straightforward: “The ESET Order satisfies [all] elements for
13 collateral estoppel for the ’844 and ’780 Patents and already qualifies as a ‘final judgment’ for
14 purposes of collateral estoppel. This Court therefore should enter judgment of invalidity.” Mot. at 2
15 (internal citations omitted). Finjan objects, arguing that the ESET Order is not sufficiently firm.
16 Opp. at 3-4. In other words, the parties quibble only as to whether the first proceeding ended with a
17 final judgment on the merits. See Reply at 1.
18 It is well settled that “[t]o be ‘final’ for collateral estoppel purposes, a decision need not
19 possess ‘finality’ in the sense of 28 U.S.C. § 1291.” Luben Industries, Inc. v. United States, 707
20
1 SonicWall applies the four-element collateral estoppel standard detailed in Oyeniran v. Holder.
21
672 F.3d 800, 806 (9th Cir. 2012) as amended (May 3, 2012). Under this standard, to foreclose
relitigation of an issue under collateral estoppel, four conditions must be met: “(1) the issue at stake
22
was identical in both proceedings; (2) the issue was actually litigated and decided in the prior
proceedings; (3) there was a full and fair opportunity to litigate the issue; and (4) the issue was
23
necessary to decide the merits.” Id. (citing Montana v. United States, 440 U.S. 147, 153–54 (1979)).
For claim construction, however, district courts in this circuit have consistently applied the standard
24
articulated more recently in Hydranautics. See, e.g., e.Digital Corp. v. Futurewei Techs., Inc., 772
F.3d 723, 726 (Fed. Cir. 2014) (affirming a California district court decision that applied the
25
Hydranautics standard); Droplets, Inc. v. Yahoo! Inc., No. 12-CV-03733-JST, 2019 WL 5781915,
at *2 (N.D. Cal. Oct. 15, 2019) (applying Hydranautics standard); UCP Int'l Co. Ltd. v. Balsam
26
Brands, Inc., No. 16-cv-07255-WHO, 2017 WL 5068568, at *3 (N.D. Cal. Nov. 3, 2017) (same);
West v. Quality Gold, Inc., No. 5:10-cv-03124-JF (HRL), 2011 WL 6055424, at *2 (N.D. Cal. Sept.
27
16, 2011) (same); Elan Microelectronics Corp. v. Apple, Inc., No. C 09-01531 RS, 2010 WL
1 F.2d 1037, 1040 (9th Cir. 1983). Rather, “[a] ‘final judgment’ for purposes of collateral estoppel
2 can be any prior adjudication of an issue in another action that is determined to be ‘sufficiently firm’
3 to be accorded conclusive effect.” Id. (citations omitted); see also In re Lockard, 884 F.2d 1171,
4 1175 (9th Cir.1995). The Ninth Circuit has set forth several factors that should be considered when
5 determining whether an order is sufficiently firm: “(1) whether the decision was not avowedly
6 tentative; (2) whether the parties were fully heard; (3) whether the court supported its decision with
7 a reasoned opinion; and (4) whether the decision was subject to an appeal. Luben Industries, 707
8 F.2d at 1040. “Finality will be lacking if an issue of law or fact essential to the adjudication of the
9 claim has been reserved for future determination, or if the court has decided that the plaintiff should
10 have relief against the defendant of the claim but the amount of the damages, or the form or scope
11 of other relief, remains to be determined.” Restatement (Second) of Judgments § 13 (1982).
12 After considering the authorities and facts cited by the parties, the Court concludes that these
13 factors counsel in favor of conferring preclusive effect to the ESET Order. There can be no dispute
14 that the ESET Order was a well-reasoned opinion. See generally ESET Order. Nor can there be
15 dispute that it was not avowedly tentative. Id. The ESET Order is also subject to appeal and, indeed,
16 is currently on appeal to the Federal Circuit. Finjan, Inc. v. ESET, LLC, Case No. 3:17-cv-0183-
17 CAB-BGS, ECF 878 (“Notice of Appeal”); see In re Lockard, 884 F.2d at 1175 (“that the decision
18 was subject to appeal or was in fact reviewed on appeal [is a] factor[] supporting the conclusion that
19 the decision should be given preclusive effect.”). These factors clearly tilt in favor of applying
20 collateral estoppel.
21 The remaining factor to consider is whether the parties were sufficiently heard. More
22 concretely, the question before the Court is whether Finjan was sufficiently heard when the ESET
23 Court determined Patents ’844 and ’780 were indefinite. The Court finds that it was. In its
24 indefiniteness ruling, the ESET Court considered both ESET’s motion for summary judgment and
25 Finjan’s motion for reconsideration. ESET Order; Reconsideration Order. While Finjan suggests
26 that the ESET Order is “based on an incomplete presentation of the evidence,” a review of both
27 orders and the supporting papers suggests otherwise. Indeed, the ESET Court explicitly rejected
1 evidence because the Court evaluated only the testimony of Dr. Eric Cole, Finjan’s expert on
2 infringement on one of the five Asserted Patents (the ’844 Patent).” Finjan, Inc. v. ESET, LLC, Case
3 No. 3:17-cv-0183-CAB-BGS, ECF 872 at 4 (“Motion for Reconsideration”). The court explained:
4
The Court did not shift the burden of proving validity to Finjan, but
5 rather concluded that ESET demonstrated by clear and convincing
evidence that Finjan’s inconsistent interpretations of a claim term
6 employed in its infringement analyses established that the term was
indefinite. Finjan’s proffer that it could offer still further testimony
7 to explain the lack of consensus among its own experts in
construing the term only serves to underscore the lack of certainty
8
among those of skill in the art, making the term indefinite and the
9 Court’s entry of summary judgment correct.
10
Reconsideration Order at 3. In other words, the ESET Court was motivated by inconsistent
11
interpretations of a claim term. Additional expert testimony, the court explained, would not rectify
12
this flaw. See id.
13
The Court thus enters a judgment of invalidity as to the ’844 and ’780 Patents.
14
B. The ’494 Patent
15
The remaining question before the Court is whether the ESET Order’s preclusive reach
16
extends to the ’494 Patent. SonicWall argues that the ESET Order satisfies the collateral estoppel
17
elements for the ’494 Patent. Mot. at 3. To this end, it highlights that “the ’494 Patent has the same
18
intrinsic record on which the ESET Order relied” and that its stipulation as to a different construction
19
of the term ‘Downloadable’ is irrelevant. Id. at 3-5. Finjan responds that “[t]he Court has discretion
20
to decline to apply collateral estoppel, even if it finds the Ninth Circuit factors are satisfied. Here,
21
considerations of fairness and uniformity counsel against applying the collateral estoppel bar to the
22
’494 Patent.” Opp. at 4. Finjan further argues that “this Court has construed the term
23
‘Downloadable’ in the claims of the ’494 Patent the same way seven of the eight courts have
24
construed that term, i.e., one that does not include the term ‘small.’” Id. It also argues that SonicWall
25
“has consistently advocated for the construction of ‘Downloadable’ that this Court adopted, even
26
after the ESET Court entered its outlier construction.” Id. at 5.
27
As an initial matter, the Court finds that the Ninth Circuit elements are satisfied as to the
1 ’494 Patent. The ESET Order, as explained above, is sufficiently firm to be considered a final
2 judgment on the merits. Hydranautics, 204 F.3d at 885. (requiring that “the first proceeding ended
3 with a final judgment on the merits”). And Finjan, the party against whom collateral estoppel is
4 asserted, was a party in the ESET case. Id. (requiring that “the party against whom collateral estoppel
5 is asserted was a party or in privity with a party at the first proceeding”). The Court also finds that
6 “the issue necessarily decided at the previous proceeding is identical to the one which is sought to
7 be relitigated” Id. A ruling on an issue in a prior judgment can have preclusive effect even if the
8 issue is raised in a later case involving different patents and different claims. See Ohio Willow Wood
9 Co. v. Alps S., LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013). The patent claims need not be identical,
10 but “substantially related” so that the issues of validity are materially the same. Id. “If the differences
11 between the unadjudicated patent claims and adjudicated patent claims do not materially alter the
12 question of invalidity, collateral estoppel applies.” Id. The ESET Court invalidated Patents ’844,
13 ’780, ’086, ’621, and ’755 because the claim language of those patents incorporated the ‘520 Patent
14 definition of “Downloadable,” which was limited in scope to “small executable or interpretable
15 application programs.” ESET Order at 4. The ESET Court emphasized that Patents ’844, ’780, ’086,
16 ’621, and ’755 were invalid because “[i]nconsistent language used later cannot support a broad claim
17 construction”—i.e., one that did not limit an executable by size—“when the explicit definition is
18 incorporated from earlier patents in the family tree.” Id. There is no dispute that the ’494 Patent is
19 part of this same family tree of patents incorporating the ‘520 Patent definition of “Downloadable.”
20 See generally Opp. This Court finds that the ESET Court spoke directly to the question before the
21 Court now: whether the ’494 Patent is invalid arising from the indefiniteness of the term
22 “Downloadable.” See Ohio Willow, 735 F.3d at 1342 (“Our precedent does not limit collateral
23 estoppel to patent claims that are identical. Rather, it is the identity of the issues that were litigated
24 that determines whether collateral estoppel should apply.”); see also Mot. at 3 (“To bring this issue
25 into clear focus, if Finjan had asserted the ’494 Patent in the ESET case, the ESET Order already
26 would have held the ’494 Patent invalid.”).
27 This conclusion is unchanged by Finjan’s invitation to the Court to decline to apply collateral
1 the collateral estoppel bar to the °494 Patent.” Opp. at 4. The Court recognizes that the parties here
2 || stipulated to a claims construction that did not implicate the ‘520 Patent definition of
3 “Downloadable,” but the Federal Circuit has made clear that “the defense of collateral estoppel
4 || based ona final judgment of patent invalidity in another suit can ‘be timely made at any stage of the
5 affected proceedings.’” Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1579-80 (Fed. Cir. 1994),
6 || as corrected on reh'g (Sept. 14, 1994) (internal citations omitted). And Finjan does not cite any case
7 where a district court declined to apply collateral estoppel to the invalidation of a patent even where
8 the prior ruling satisfied all elements of collateral estoppel. See, e.g., Opp. at 5 (providing examples
9 of where courts chose to apply collateral estoppel). The Court thus enters a judgment of invalidity
10 || as to the °494 Patent.
11 IV. ORDER
12 For the foregoing reasons, the Court finds that the ESET Order has a preclusive effect as to
13 the indefiniteness of the term “Downloadable” in the °844, ’780, and’494 Patents. The Court
14 || GRANTS SonicWall’s motion for judgment of invalidity and enters judgment that the □□□□□ □□□□□
3 15 and °494 Patents are invalid.
2 16
17 |} Dated: July 22, 2021 Lh han □□
18 fom
BETH LABSON FREEMAN
19 United States District Judge
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